PharmaCielo, which cultivates, processes and manufactures cannabis extracts in Rionegro, Columbia, has production assets including approx. 1.7 million square feet of open-air greenhouses and can access another roughly 13 million square feet of production through a network of existing contract flower farmers.

Fagan says he considers PharmaCielo to be the most advanced Columbian licensed producer with about a six- to 18-month first-mover advantage over nearly all Colombian competitors. Internationally, Columbia’s climate gives PharmaCielo a leg up on the competition, says Fagan, who expects the company to initially focus on the global CBD market, which could hit $9 to $11 billion by 2023.

“PCLO has an unfair global cost advantage due to its equatorial location providing 12 hours of sunlight year-round, and permitting up to five outdoor growing cycles/year, conditions not found anywhere else cannabis cultivation is permitted. With favourable Colombian regulations, we estimate PCLO could have CBD yields ~250x–300x higher than those available to global peers. Given the above, we believe PCLO could achieve CBD extract production costs as low as ~$0.15–0.25/gram, potentially the lowest globally,” Fagan says.

The analyst is forecasting PCLO to capture just under two per cent of the global market share by 2023, which translates into $175 million in revenues. For fiscal 2019, Fagan is estimating revenue and EBITDA of $3.1 million and negative $14.3 million, respectively, and revenue and EBITDA in 2020 of $61.3 million and $23.9 million, respectively. (All figures in US dollars unless noted otherwise.)

Fagan has initiated coverage with a “Buy” rating and C$12.00 target price, which represented a 12-month return of 58.9 per cent at the time of publication.

About Jayson MacLean

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.